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GAIN Report Global Agriculture Information Network Foreign Agricultural Service GAIN Report Global Agriculture Information Network Voluntary Report - public distribution Date: 4/4/2003 GAIN Report #KS3011 Korea, Republic of Market Development Reports Marketing Opportunities in the Provincial Cities 2003 Approved by: Daryl A. Brehm U.S. Embassy, Seoul Prepared by: Susan B. Phillips Seh Won KIM Report Highlights: This report provides information about the market for U.S. processed food products outside of the capital city of Seoul. Increasingly, FAS Cooperators, MAP participants, and exporters are expanding their efforts to include these other major Korean urban areas. While Seoul marketers and consumers lead the country in innovation, the ATO finds growing interest in provincial areas for U.S. processed food products. Includes PSD changes: No Includes Trade Matrix: No Unscheduled Report Seoul ATO [KS2], KS GAIN Report #KS3011 Page 1 of 8 MARKETING OPPORTUNITIES IN THE PROVINCIAL CITIES INTRODUCTION There are seven metropolitan cities in Korea: Seoul, Busan, Incheon, Daegu, Kwangju, Daejon and Ulsan. In order to be designated as a metropolitan city in Korea the population of the city must exceed one million. The combined population of these six metropolitan cities except Seoul (of which the city population is 10 million) is about 13 million. The Seoul-Incheon "corridor" comprises a largely urban area with a population of about 22 million people. Although the markets in the cities outside Seoul are still small, they are growing. There is potential for faster growth of imported food products in these provincial areas, while the future growth rate of the market in Seoul slows. In the past, many imported processed foods were not widely available in the retail sector of provincial metropolitan cities, but thanks to the launching of discount stores and large-scale department stores in recent years, many processed foods are now available at these outlets in these other cities. It is assumed that about 60 percent of total imported processed foods are consumed in the Seoul urban area described above, and the remaining 40 percent are consumed in the local metropolitan cities and provinces. In the past, consumers in the provincial cities demonstrated a more negative, "nationalistic" reaction than those in Seoul towards imported foods, but these attitudes are softening. ATO Seoul has done some promotional activities in provincial cities, such as table top shows, over the past several years. We have also surveyed the markets in these major cities, and determined that consumer demand for processed imported food products is on the increase. Of course, most of these food products are imported by traders located in Seoul and its neighboring Gyeonggi province, but are distributed by the head offices of retail chains, or private importer/distributors located in Seoul, or wholesalers in the local cities. For a U.S. exporter, the best means to tap these markets are through an importer, who either has distribution to the provinces (this is rare), or can access a distribution channel with a partner or customer. ATO Seoul plans to give more attention to the cities outside Seoul, visit the cities regularly, survey the market and expand some promotional activities in the future, if possible, together with cooperators, importers and exporters when possible. Retail managers in these areas have opined that they are often overlooked by the distribution chain, and that their customers are more willing to try imported food products than Seoul "managers" currently believe. Many retail outlets, whether part of national or regional chains, are currently in a very competitive environment, and welcome new products that can help differentiate them from their competition. EXPLORING THE PROVINCIAL CITIES The Korean government is now trying to develop Pusan and Incheon as the logistical and financial hubs of Northeast Asia. Seoul metropolitan city is already overpopulated, and traffic is congested (a fact to which any visitor will attest). Accordingly, the new government of Korea has proposed to move the administrative capital to Chungcheong-do, Daejon metropolitan city’s neighboring province (note that this is only a proposal). UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report #KS3011 Page 2 of 8 The Korean Report on Survey of Wholesale and Retailer Trade, issued February 2002, indicates that the annual sales of retailers for food, food stuff and cigarettes in Seoul amounted to $2.63 billion, $871 million in Busan, $330 million in Daegu, $563 million in Incheon, $375 million in Gwangju, $295 million in Daejeon, and $126 million in Ulsan in 2000 (The average exchange rate was 1,130.6 won against U.S. dollar in 2000). Advantages Challenges Emerging markets, possible higher growth rates The market is still small Good infrastructure Few direct importers of processed foods Large population and hubs of the adjacent U.S. Exporters and Korean Importers not provinces and peripheral cities targeting these markets yet Many manufacturing facilities Economy is weaker, compared to Seoul The Estimated Gross Regional Domestic Product (GRDP at current prices) in 2001 and estimated population in 2002 City GRDP ($Billion) Percent Population (Million) Percent Pusan 25.4 6.1% 3.70 7.8% Daegu 14.3 3.5% 2.54 5.3% Incheon 19.8 4.8% 2.59 5.4% Gwangju 9.5 2.3% 1.41 3.0% Daejeon 9.8 2.4% 1.44 3.0% Ulsan 21.1 5.1% 1.06 2.2% Subtotal 99.9 24.2% 12.74 26.7% Seoul 88.5 21.4% 10.04 21.1% Gyeonggi province 86.5 20.9% 9.62 20.2% 8 other provinces 139.1 33.5% 15.24 32.0% Total 414.0 100% 47.64 100% * This table does not include the productions of national defense and import duties *Sources: Korean Statistical Yearbook 2002, and Social Indicators in Korea 2002 Seoul (606 km2), Incheon (980 km2) and Gyeonggi Province (10,137 km2) adjoin together, accounting for 11.8% of the total land of 99,538 km2. The combined population of 22.25 UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report #KS3011 Page 3 of 8 million of these three places accounts for 46.7% of the total population in Korea. Annual Restaurant Sales by Metropolitan Cities in 2000 City No. of Restaurants No. of workers Annual Sales Percent/ ($Million) Sales Busan 49,137 118,464 2,801 8.8% Daegu 31,049 71,731 1,378 4.4% Incheon 27,086 64,996 1,358 4.3% Gwangju 15,747 40,217 1,081 3.4% Daejeon 16,656 41,915 992 3.1% Ulsan 13,195 30,360 602 1.9% Subtotal 152,870 367,683 8,211 25.9% Seoul 111,437 331,676 8,247 26.1% Gyeonggi province 95,251 242,650 5,208 16.4% 8 other provinces 211,018 488,467 9,992 31.6% Total 570,576 1,430,476 31,658 100% Sources: Report on the Survey of Wholesale and Retail Trade 2000, published in February 2002. The annual restaurant sales in Seoul Metropolitan City were greater than those of 6 local metropolitan cities in 2000. Annual Sales of Wholesale and Retail Trade by Metropolitan Cities in 2000 City No. of No. of workers Annual Sales Percent/ Establishments ($Billion) Sales Busan 83,752 212,126 35.1 9.8% Daegu 54,281 133,919 17.3 4.8% Incheon 39,406 100,145 10.4 2.9% Gwangju 26,722 73,960 8.3 2.3% Daejeon 26,874 72,547 8.0 2.2% UNCLASSIFIED Foreign Agricultural Service/USDA GAIN Report #KS3011 Page 4 of 8 Ulsan 16,855 43,937 4.1 1.1% Subtotal 247,890 636,634 83.2 23.1% Seoul 237,985 816,594 170.2 47.3% Gyeonggi Province 129,604 355,987 46.9 13% Eight other provinces 301,206 684,002 59.8 16.6% Total 916,685 2,493,217 360.1 100% Sources: Report on the Survey of Wholesale and Retail Trade 2000, published in February 2002. The annual sales of wholesale and retail trade in Seoul Metropolitan City alone more than doubled than those in 6 local metropolitan cities and accounted for 47.3 percent of the total sales in Korea in 2000. BUSAN MARKET OVERVIEW Busan (2002 population; 3.7 million and land size; 762 sq. km.) is a port city located in the southern part of Korea, about 420 km from Seoul, and is the second-largest city and principal port of South Korea handling most of South Korea’s foreign trade. It is also the world’s third largest container port. The Korean Government has plans to develop Busan into an integrated logistics hub with multiple functions including trade and international business. These plans include designating Busan Port as a special economic zone (SEZ). If the SEZ does materialize, Busan will attract investments from multinational firms in the fields of information technology, biotechnology, the motion picture industries, and the environment. Busan is the hub of Gyeongnam province of which population combined is about 7 million. Currently, Busan has retail, wholesale, tourism, restaurant, and manufacturing industries. Busan is also well-known for its beaches in Korea and attracts millions of vacationers in summer. Busan Metropolitan City also hosted the Asian games in 2002. Busan is served by Gimhae International Airport. International flights are mostly to Japan (Tokyo, Nagoya, Osaka and Fukuoka), but also include Bangkok and Shanghai. Domestic flights are between Busan and Seoul, and 5 other cities in Korea. Other transportation systems such as trains, express buses and ferries are available between Busan and major cities in Korea. ATO Seoul visits Busan, holds table top shows, and conducts surveys on the retailer market annually, including department stores such as Lotte, Top Mart (a local supermarket chain), discount stores, hotels, and so forth.
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